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Since 2007, attention has been focused on nursing home ownership by private investment (PI) firms. Nursing home providers are required to disclose parties with an ownership or control interest in order to participate in Medicare or Medicaid. CMS, the HHS agency responsible for managing these two programs, maintains ownership and chain data in its Provider Enrollment, Chain, and Ownership System (PECOS). GAO examined (1) the extent of PI nursing home ownership and firms' involvement in homes' operations, (2) whether PECOS reflects PI ownership, and (3) how HHS and states use ownership data for oversight. GAO identified PI ownership using a proprietary database and analyzed data from six PI firms about their interest and involvement in nursing homes. GAO examined PECOS data for selected PI-owned nursing home chains and discussed ownership data with officials from HHS, CMS, and six states that also collect data.

GAO found that 1,876 unique nursing homes were acquired by PI firms from 1998 through 2008. While some of the acquisitions involved entire nursing home chains, which included both the operations and any owned real estate, other acquisitions involved only the real estate. Sometimes the same nursing homes were acquired more than once. Ten PI firms accounted for 89 percent of the 1,876 unique nursing homes acquired by PI firms during this period. Of the six PI firms from which GAO collected information, those that acquired a chain reported being more involved in nursing home operations than those that only acquired the real estate. These firms had representatives on the nursing home chain's board of directors, but they generally characterized their involvement as related to the chain's strategic direction rather than day-to-day operations. PI firms that acquired real estate only had no representation on the boards of the operating companies, but officials at one PI firm observed that some leasing arrangements have the potential to affect operations. PECOS provided a confusing picture of the complex ownership structures and chain affiliations of the six PI-owned nursing home chains GAO reviewed. The database did not provide any indication of the hierarchy or relationships among the numerous organizational owners listed for PI-owned nursing homes. Further, PI ownership was often not readily apparent in the data, which could be the result of (1) PI firms not being required to be reported because of how they structured their acquisitions, (2) provider confusion about the reporting requirements, or (3) related entities that were reported but were not easily identifiable with the PI firms. Finally, PECOS chain information was not straightforward and was sometimes incomplete, making it difficult to link all the homes in a chain. Compounding these shortcomings, CMS's ability to determine the accuracy and completeness of the reported ownership data is limited. HHS has made limited use of PECOS ownership data. The only CMS division with routine access to PECOS data has been largely focused on populating the database and has not developed any standardized reports on nursing home ownership that it could share with interested parties. Some states collect their own ownership information but it can be limited to owners that operate in their state. As a result, tracking compliance problems among commonly owned homes or multistate chains can be ad hoc. State officials and others expressed interest in nationwide ownership data, such as PECOS, to improve nursing home oversight. Recognizing the growing interest in PECOS data, CMS has established a workgroup to consider how to accommodate the PECOS interests of other groups within the agency and is considering whether and how to provide access to external parties such as states. The implementation of the Patient Protection and Affordable Care Act provides CMS with an opportunity to address shortcomings in the current PECOS database and to make ownership information available to states and consumers in a more intelligible way. GAO recommends that the Secretary of HHS and CMS Administrator consider requiring the reporting of certain information to make nursing home ownership structures more understandable and take other actions to improve the accuracy and dissemination of these data as HHS implements new ownership reporting requirements in the 2010 Patient Protection and Affordable Care Act. HHS concurred with all of GAO's recommendations.

Recommendations for Executive Action

Status: Open

Comments: On May 6, 2011, CMS published a proposed rule for implementing, among other things. sections of the Patient Protection and Affordable Care Act related to nursing home transparency (NPRM 1351-P: Medicare Program; Prospective Repayment System and Consolidated Billing for Skilled Nursing Facilities; Disclosures of Ownership and Additional Disclosable Parties Information). In the preamble to the proposed rule, CMS noted GAO's findings that the ownership information collected by CMS was not transparent because it did not establish the relationship of each owner to the nursing home and to one another. In the proposed rule, CMS revises the ownership information that nursing home facilities must report to participate in Medicare and Medicaid, however, these changes did not fully address this recommendation. Specifically, CMS proposed it collect information on the organizational structure of "additional disclosable parties" and on the relationship of such parties to the nursing home and one another. However, it is possible that some persons or entities with a direct or indirect ownership or control interest may not meet the definition of an "additional disclosable party." Thus, some ownership entities may be reported to CMS without any information to help identify where they fit into the ownership hierarchy. Nonetheless, CMS agreed with this recommendation and has yet to issue final regulations, so this recommendation remains open.

Recommendation: As the Secretary of HHS develops regulations to implement the expanded nursing home ownership reporting and disclosure requirements contained in the Patient Protection and Affordable Care Act, the Secretary, given the complex arrangements under which nursing homes can be acquired and operated, should consider requiring the reporting of the organizational structure and the relationships to the facility and to one another of all persons or entities with direct or indirect ownership or control interests in the provider (as defined in the act), such that the hierarchy of all intermediate persons and entities from the provider level up to the chain and the ultimate owner is described.

Agency Affected: Department of Health and Human Services

Status: Open

Comments: On May 6, 2011, CMS issued a proposed rule implementing, among other things, sections of the Patient Protection and Affordable Care Act related to nursing home transparency (NPRM 1351-P: Medicare Program; Prospective Repayment System and Consolidated Billing for Skilled Nursing Facilities; Disclosures of Ownership and Additional Disclosable Parties Information). In this proposed rule, CMS did not specifically propose that providers specify whether ownership entities reported have an operational role. Nonetheless, CMS agreed with this recommendation and and has yet to issue final regulations, so we are leaving this recommendation open.

Recommendation: As the Secretary of HHS develops regulations to implement the expanded nursing home ownership reporting and disclosure requirements contained in the Patient Protection and Affordable Care Act, the Secretary, given the complex arrangements under which nursing homes can be acquired and operated, should consider requiring the reporting for entities reported as having ownership or control interests, specify whether or not the entities have an operational role; for example, special purpose entities created solely for the purpose of acquiring the nursing home but having no operational role should be identified as such.

Agency Affected: Department of Health and Human Services

Status: Closed - Implemented

Comments: In September 2010, we reported that while entities with at least 5 percent ownership were listed in PECOS, the database does not include information on their specific ownership percentage, adding to the difficulties determining the hierarchy and relationships among the owners listed. We recommended that the Secretary of HHS consider requiring the reporting of the percentage ownership interest in the provider of all entities and individuals with ownership or control interest. CMS agreed with this recommendation, and consistent with it, revised the Medicare provider enrollment application in July 2011. The enrollment application now asks providers to report the percentage ownership interest of entities and individuals with ownership or control interest.

Recommendation: As the Secretary of HHS develops regulations to implement the expanded nursing home ownership reporting and disclosure requirements contained in the Patient Protection and Affordable Care Act, the Secretary, given the complex arrangements under which nursing homes can be acquired and operated, should consider requiring the reporting of the percentage ownership interest in the provider for all entities and individuals who have an ownership or control interest (as defined in the act).

Agency Affected: Department of Health and Human Services

Status: Open

Comments: On May 6, 2011, CMS published a proposed rule implementing, among other things, sections of the Patient Protection and Affordable Care Act related to nursing home transparency (NPRM 1351-P: Medicare Program; Prospective Repayment System and Consolidated Billing for Skilled Nursing Facilities; Disclosures of Ownership and Additional Disclosable Parties Information). In the proposed rule, CMS proposes to revise the ownership information that nursing home facilities must report to participate in Medicare and Medicaid, however, these changes do not fully address this recommendation. Specifically, CMS proposed that each member of the nursing home's governing body or each person who is an officer, director, member, partner, trustee, or managing employee of the facility be reported, including their name and title and period of service. However, members of the nursing home chain's governing body--who were the focus of this recommendation--may not be among those in this group and therefore may not be reported. Nonetheless, CMS agreed with this recommendation and has yet to issue final regulations, so we are leaving this recommendation open.

Recommendation: As the Secretary of HHS develops regulations to implement the expanded nursing home ownership reporting and disclosure requirements contained in the Patient Protection and Affordable Care Act, the Secretary, given the complex arrangements under which nursing homes can be acquired and operated, should consider requiring the reporting of the names and titles of the members of the chains' governing body.

Agency Affected: Department of Health and Human Services

Status: Open

Comments: On May 6, 2011, CMS published a proposed rule implementing, among other things, sections of the Patient Protection and Affordable Care Act related to nursing home transparency (NPRM 1351-P: Medicare Program; Prospective Repayment System and Consolidated Billing for Skilled Nursing Facilities; Disclosures of Ownership and Additional Disclosable Parties Information). In the proposed rule, CMS revises the ownership information that nursing home facilities must report to participate in Medicare and Medicaid, however, these changes did not fully address this recommendation. Specifically, CMS proposed that each member of the nursing home's governing body or who is an officer, director, member, partner, trustee, or managing employee of the facility be reported, including their name and title and period of service. This group could include individuals with an ownership or control interest--which was the focus of GAO's recommendation--but this is not specified. Also, the intent of GAO's recommendation was for CMS to capture the affiliation of these individuals to the organizations they represent (e.g. partner of private equity firm that purchased the nursing home) as opposed to their title relative to the nursing home. CMS agreed with this recommendation and final regulations have not yet been issued, so we are leaving this recommendation open.

Recommendation: As the Secretary of HHS develops regulations to implement the expanded nursing home ownership reporting and disclosure requirements contained in the Patient Protection and Affordable Care Act, the Secretary, given the complex arrangements under which nursing homes can be acquired and operated, should consider requiring the reporting of the organizational affiliation of individuals with an ownership or control interest (as defined in the act).

Agency Affected: Department of Health and Human Services

Status: Closed - Implemented

Comments: As part of our review of private investment ownership of nursing homes, we examined nursing home ownership information collected by CMS in its Provider Enrollment, Chain, and Ownership System (PECOS). To be eligible for Medicare and Medicaid payments, nursing homes are required to submit information on individuals or entities that have a direct or indirect ownership or control interest in the provider. Also, owners of a whole or partial interest in any mortgage, deed of trust, note or other obligation secured by the nursing home or any of its property or assets, equal to 5 percent or more of the total property and assets, are among those required to be disclosed. Nursing homes report ownership information to CMS through the agency's Medicare enrollment application when they apply to participate in the Medicare program, and CMS stores this information in PECOS. In September 2010, we found that one private investment firm that leased nursing home real estate to a provider that had a security interest in the assets of the provider was not reported in PECOS. CMS officials noted that it may not be clear to providers that these entities must be reported, as the instructions on the application do not specifically indicate that a security interest is a reportable interest, and that going forward CMS may need to revise the application to make this explicit. To ensure proper administration of current reporting requirements, we recommended that CMS issue guidance on the circumstances under which the holder of a security interest in a provider may be considered to have a reportable interest. CMS agreed with this recommendation and said it anticipated addressing it by revising the Medicare enrollment application. Consistent with our recommendation and its planned action, in July 2011, CMS revised the Medicare provider enrollment application. The application now clearly indicates that all entities with a security interest in the provider or 5 percent or more must be reported.

Recommendation: To ensure proper administration of current reporting requirements, the Administrator of CMS should issue guidance on the circumstances under which the holder of a security interest in a provider may be considered to have a reportable interest.

Comments: The Centers for Medicare & Medicaid Services (CMS) agreed with this recommendation and stated it would incorporate this change into a future version of the Medicare provider enrollment application. In July 2011, CMS revised the enrollment application (CMS 855A - Medicare Enrollment Application for Institutional Providers), however, we did not observe any changes made to how chain information is collected. The form still does not require each provider to report the identify of other nursing homes that are part of the same chain. Nonetheless, based on CMS's concurrence with this recommendation, we are leaving it open. In 2012, CMS said that upon further review it determined that requiring the provider to report information on all other nursing homes that are part of the chain would pose an undue burden on the provider. The agency said that the provider enrollment system (PECOS) enables CMS to query Medicare enrollments and identify specific chains associated with other enrollments. CMS stated that it has no further updates on this and considers the matter closed.

Recommendation: To ensure that all providers that belong to the same nursing home chain can be readily identified, the Administrator of CMS should require each provider to report the identity of other nursing homes that are part of the same chain.

Comments: According to the Centers for Medicare and Medicaid Services (CMS), the agency released an update to PECOS that allows states to view nearly all provider enrollment data fields in PECOS. CMS also reported that CMS regional office staff have been provided access to PECOS, as well as other components within CMS on an as needed basis. In addition, in 2012, consistent with our recommendation, CMS began to include information identifying the individuals and entities with an 5 percent or more ownership interest in or managing control of nursing homes on its Nursing Home Compare web site.

Recommendation: To improve the usability and accuracy of the ownership and control information collected and stored in PECOS, the Administrator of CMS should expand the scope of CMS's existing workgroup intended to make PECOS data available within the agency by developing a comprehensive strategy for disseminating PECOS data to HHS, states, and the public; for example, CMS could develop and make available standardized reports on nationwide ownership data and could include ownership information on its Nursing Home Compare Web site.

Comments: CMS stated that it is currently engaged with states on the exchange of provider information required to implement new provider enrollment screening requirements, and according to CMS, it plans to use these interactions to gain information and feedback from the states on best practices in the collection and public dissemination of nursing home ownership and chain information. We will follow up next year to see if CMS has made progress in its plans to examine state best practices. In 2012, CMS stated that it had recently implemented an automated provider screening system, which will allow the agency to screen all providers including nursing homes. The agency said that it is continuing to have internal discussions and explore data sources for the automated provider screening system that can provide nursing home information. CMS stated that it had no further updates relative to this recommendation and considered the matter closed.

Recommendation: To improve the usability and accuracy of the ownership and control information collected and stored in PECOS, the Administrator of CMS should examine state systems to identify best practices for the collection and public dissemination of nursing home ownership and chain information, including ways in which states make the hierarchy among owners more apparent.

Comments: CMS's Provider Enrollment Operations Group (PEOG) is currently evaluating the contractor Quality Assurance Surveillance Plans (QASP) criteria that are currently used to assess contractor performance as it relates to timeliness and accuracy of processing provider enrollment applications. CMS stated that PEOG expects to include the information in our finding as one of the elements which to be evaluated. Further they plan to evaluate this as part of focused or other reviews of the contractors' provider enrollment operations. CMS has a number of steps planned that will address this recommendation; we will follow up next year to see what actual changes CMS has made to its process for monitoring contractors' activities to review the ownership information submitted by providers. In 2012, CMS reported taking several actions to improve their oversight of its contractors since we made our recommendation. First, CMS officials reported that beginning in January 2012, the agency modified its audit procedures to increase the frequency with which it reviews contractors' processing of enrollment applications of Medicare Part A providers, which include nursing home providers. According to CMS officials, formerly CMS would pull a sample of the Medicare part A applications processed by a contractor for review once every 5 years, now a sample is reviewed every year. In addition, CMS officials reported that the agency is now pulling applications specific to nursing home providers for review purposes. Finally, CMS included more detailed language in a checklist reviewers use in conducting their evaluations to better ensure that they thoroughly check whether all information from the application, including ownership information, was completely and accurately entered into the Provider Enrollment, Chain, and Ownership System (PECOS).

Recommendation: To improve the usability and accuracy of the ownership and control information collected and stored in PECOS, the Administrator of CMS should more closely monitor the activities of CMS contractors that review the ownership and control information submitted by providers that participate in Medicare and Medicaid to help ensure its accuracy and completeness.

Comments: CMS has made some changes to the form used to collect ownership and control information from nursing home providers (in accordance with provisions in the Patient Protection and Affordable Care Act). However, not enough time has passed to warrant the agency reviewing its reporting requirements for the purposes of adjusting them to evolving ownership structures. Therefore, this recommendation remains open. In 2012, CMS stated that it has no further updates and considers the matter closed. LM 9/21/12.

Recommendation: To help ensure that the requirements for the collection of ownership and control information from nursing home providers that participate in Medicare and Medicaid keep pace with evolving ownership structures, the Administrator of CMS should periodically review the requirements related to reporting on the agency's provider enrollment form to ensure that it promotes accurate and complete reporting of nursing home ownership information consistent with the statute.